Fixed-income securities comprise bonds and other short- and long-term, fixed-return debt instruments issued by a wide range of institutions, including national and local governments, quasi-governmental bodies, public and private corporations, and large nonprofit organizations.
Fixed-income securities have been generally regarded as one of the safer, more conservative investment opportunities and have served as core holdings for many institutional investors and wealth investors. Various fixed-income securities are issued to finance specific projects, such as infrastructure building, and thus have clearly identifiable purposes, while other fixed-income securities have funded the general activities of governments and corporations thereby providing unique opportunities for responsible investors to participate in the creation of public goods, infrastructure, and long-term corporate assets.
Today, responsible investment in fixed-income securities includes an analysis of the Environmental, Social, and Corporate Governance (ESG) factors associated with issuers to obtain a better understanding of financial risks and opportunities. This may include an analysis of the collateral benefits caused by such investments, as well as harms caused to society based on such investments. Typically, the analysis entails the gathering and weighting of ESG factors not included in traditional fixed-income analysis.
While today's rating agencies play a fundamental role in determining credit risk associated with fixed-income securities, rating agencies generally do not integrate ESG factors into their analysis. In addition, the gathering and weighting of ESG factors affecting a fixed-income security can be a time consuming and arduous task. Further, although most responsible investors are under increasing regulatory mandates to invest responsibly, most do not have means for performing ESG analysis of issuers without going to specialist providers, resulting in additional costs to responsible investors on ever tightening procurement budgets.
Accordingly, there exists a need for improved products, systems and techniques for responsible investment.